NEW YORK (CNNfn) - The forecasts for major airlines continued to lose altitude Tuesday, the day after the largest carrier announced it was cutting its fleet due to continued weak demand for air travel.

Merrill Lynch analyst Michael Linenberg cut his estimates for all but one major airline Tuesday, saying he now sees industry losses for this year reaching a total of $2 billion, up from his earlier forecast of $1.3 billion. He expects the total revenue of U.S. carriers to fall 2.5 percent, marking only the second decline in overall revenue since the end of World War II.

Merrill Lynch analyst Michael Linenberg now believes Northwest Airlines will join the list of money-losing airlines in the thrid and fourth quarters.

Linenberg also cut his industry earnings forecast for 2002 to $630 million from his previous estimate of $1.2 billion.

But the First Call forecast still projects that No. 4 carrier Northwest Airlines (NWAC: down $0.63 to $22.38, Research, Estimates) will earn 39 cents a share in the third quarter, down from $2.06 a share a year ago, and will also be profitable in the fourth quarter.

Linenberg now forecasts Northwest to lose 10 cents in the third quarter, rather than his previous estimate of a 30 cent a share profit, and for the airline to lose money in the fourth quarter on its way to a full-year loss of $2.20 a share, wider than his previous $1.70 a share loss forecast.

On Monday, Goldman Sachs analyst Glenn Engel also cut his outlook for many of the major carriers, raising loss estimates or cutting profit forecasts.

No sign of turn around

Overall Linenberg doesn't see much sign for hope for the battered industry in the near term.

"We are hoping we're near the bottom," he said. "I don't think there's any indication that things are turning, but I think we're at the point where things aren't getting worse."

AMR announced Monday it was grounding some older jets earlier than expected to adjust for decreased demand for travel. The largest airline holding company now expects its combined American and TWA fleet to be 1 percent smaller next year, when the two carriers should have merged operations.

Linenberg said he's not yet ready to project a relatively rare decrease in the industry's overall capacity next year, although he has cut his growth estimate this year to 2.5 percent from a 4.1 percent forecast at the beginning of the year.

"Everybody is announcing some slowdown in capacity growth, with the exception of Southwest," he said. "Everyone was parking or retiring planes."

Still the industry has generally been spared the broad layoffs or staff furloughs seen in other industries in the current downturn. Only Northwest has announced any specific staffing cuts, and that is limited to salaried staff.

Linenberg said strong union contracts is one of the factors limiting layoffs, along with high retirement rates from the current work force.

"TWA is a very senior work force," he said. "You'll see a decent amount of attrition there. American won't have to furlough its work force, just slow down its hiring."